Kenanga Group Navigates Choppy Waters: A Closer Look at Their 1Q25 Performance
Malaysia’s financial landscape continues to evolve amidst a complex global environment. Today, we delve into the latest financial results from Kenanga Investment Bank Berhad (“Kenanga Group” or “The Group”) for the first quarter ended 31 March 2025 (1Q25). While the Group demonstrated resilience with an uptick in revenue, its overall profitability saw a dip compared to the same period last year. Let’s break down the numbers and understand the driving forces behind Kenanga’s performance this quarter.
Core Financial Highlights: A Mixed Bag
Kenanga Group reported a revenue of RM209.6 million for 1Q25, a slight increase from RM204.2 million in 1Q24, primarily driven by higher interest income. However, the Group’s profit before tax (PBT) and net profit saw a noticeable decline. This was largely due to a substantially higher share of associate’s profit recorded in 1Q24, which did not recur to the same extent in the current quarter, although partially mitigated by lower credit expenses this period.
1Q25 Performance
Revenue: RM209.6 million
Profit Before Tax (PBT): RM15.4 million
Net Profit: RM9.8 million
Earnings Per Share (EPS): 1.34 sen
Compared to 1Q24
Revenue: RM204.2 million
Profit Before Tax (PBT): RM26.7 million
Net Profit: RM22.8 million
Earnings Per Share (EPS): 3.15 sen
Segmental Deep Dive: Where Did Kenanga Shine (and Face Headwinds)?
Investment Banking: A Strong Rebound
The Investment Banking division delivered a robust performance, with revenue climbing to RM66.4 million in 1Q25, a significant 17.8% increase from RM56.3 million in 1Q24. More impressively, the division turned around its 1Q24 loss of RM2.1 million to a PBT of RM4.2 million this quarter. This positive shift was attributed to improved trading and investment income, bolstered by stronger interest income.
Stockbroking: Navigating Challenging Tides
The Stockbroking division faced headwinds, reporting a revenue of RM73.4 million, down from RM84.8 million in 1Q24. Consequently, the loss before tax widened to RM4.6 million compared to RM1.2 million in the previous corresponding quarter. This was primarily due to subdued trading activity on the local bourse and higher credit losses, although interest income provided some cushioning. Despite these challenges, the division successfully maintained its market share.
Asset and Wealth Management: Growth with Investment
Kenanga’s Asset and Wealth Management arm demonstrated strong top-line growth, with revenue increasing by 15.9% to RM62.6 million from RM54.0 million in 1Q24. This was driven by higher management and performance fees. However, the division’s PBT saw a decrease to RM5.8 million from RM7.6 million last year, reflecting the Group’s continued investment in expanding and growing this segment.
Listed Derivatives: Impressive Gains
The Listed Derivatives business was a standout performer, registering a 24.2% gain in revenue to RM7.9 million. Its PBT surged by 62.4% to RM2.6 million from RM1.6 million in 1Q24. This excellent performance stemmed from higher trading commissions and interest income, in line with increased trading activities in the derivatives market.
Corporate and Others: Impact of Associate Contribution
The Corporate and Others segment saw a decline in revenue to RM3.8 million from RM7.0 million in 1Q24, and its PBT decreased to RM8.4 million from RM20.1 million. This reduction was largely due to lower trading and investment income and, notably, a substantial profit contribution from an associate in 1Q24 that was not replicated this quarter.
Financial Health: A Snapshot
Looking at the balance sheet, Kenanga Group’s net assets per share stood at RM1.47 as at 31 March 2025, a slight decrease from RM1.53 at the end of 2024. Deposits from customers saw a modest increase, indicating continued trust. However, the net operating cash flow for 1Q25 was RM22.6 million, a significant reduction from RM260.9 million in 1Q24. This change in operating cash flow is a key area for investors to monitor, reflecting shifts in working capital.
Risks and Prospects: Navigating the Future
Group Managing Director Datuk Chay Wai Leong highlighted that Malaysia enters 2025 in a complex global landscape, influenced by evolving geopolitical dynamics, shifting trade policies, and volatile international markets. While recent developments like easing US-China trade tensions and stronger investor sentiment could offer a more constructive operating environment, external headwinds persist, potentially disrupting global supply chains and dampening sentiment.
Domestically, Malaysia’s economic activity is expected to remain resilient, supported by rising household income, increased tourist arrivals, an ongoing technology upcycle, and the rollout of approved investments under the Federal Budget 2025. Bank Negara Malaysia is also anticipated to maintain the Overnight Policy Rate (OPR) at 3.00% throughout 2025, aiming for a balance between stability and economic growth.
Datuk Chay emphasized Kenanga Group’s strategic priorities: “With a strong focus on digital innovation, we are scaling our core businesses and enhancing customer engagement through technology-driven solutions that simplify and elevate the financial services experience. Kenanga Group is well-positioned to capture emerging opportunities and create lasting value for stakeholders.” This forward-looking strategy focuses on strengthening recurring income streams, optimizing cost efficiencies, and diversifying product offerings.
Dividends: Returning Value to Shareholders
While no dividend was proposed for the current quarter, Kenanga Group recently paid an interim single-tier dividend of 8.00 sen per share for the financial year ended 31 December 2024 on 16 April 2025, demonstrating its commitment to returning value to shareholders.
Summary and
Kenanga Group’s 1Q25 results present a mixed picture. While overall revenue increased, the Group’s profitability faced a temporary setback largely due to a non-recurring substantial associate profit contribution in the prior year. Strong performances in Investment Banking and Listed Derivatives highlight the Group’s operational strengths, particularly in areas benefiting from higher interest income and trading activity. However, the Stockbroking segment continues to grapple with market challenges, and the Asset and Wealth Management segment’s profitability is impacted by growth investments.
The Group’s management remains focused on digital innovation, strengthening recurring income, and cost optimization to navigate the complex global and domestic economic landscape. These strategic pillars are crucial for long-term resilience and value creation.
Key points for consideration from this report include:
- The impact of non-recurring associate profits from the previous year on current quarter’s overall profitability.
- The ongoing challenges in the stockbroking sector due to subdued trading volumes and credit losses.
- The Group’s commitment to investing in growth areas, which may affect short-term profitability in segments like Asset and Wealth Management.
- The broader economic environment, including global geopolitical dynamics and domestic economic reforms, which will influence future performance.
- The effectiveness of Kenanga’s digital innovation and diversification strategies in driving future recurring income streams.
Kenanga Group’s 1Q25 report paints a picture of a financial institution actively adapting to market realities while maintaining its strategic long-term vision. The focus on digital innovation and diversified income streams appears to be a sensible path forward in a dynamic environment.
What are your thoughts on Kenanga’s performance this quarter? Do you think their strategic focus on digital innovation and recurring income will help them maintain growth momentum in the coming quarters? Share your views in the comments below!
